accnt 11

On January 1, Lang, Inc. has 100,000 shares of stock issued and outstanding. The board of directors of Lang wants to authorize a large stock dividend. This means that they must authorize a stock dividend of at least ______ shares of stock.

25,001

_____________ is a general term that refers to any shares issued to obtain capital (owner financing).

Capital stock

The board of directors of Chester, Inc. authorizes a $0.10 cash dividend to its 10,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will debit which of the following accounts and for what amount?

Common Dividend Payable for $1,000.

Payton, Inc.'s charter authorized 100,000 shares of stock with a par value of $1 per share. Payton issues 100 shares at a market value of $5 per share. The journal entry to record this transaction will include a credit to _____ in the amount of _______.

Common Stock, $1 par; $100

_______ preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Cumulative

Authorizing a cash dividend payment to investors requires three crucial dates. Identify which of the following is not a correct term to describe these dates.

Date of authorization

When a corporation declares and pays a cash dividend, there are three notable important dates. Which date does not require a formal journal entry to the financial statements?

Date of record

Identify which of the following is not generally a right of common stockholders.

Manage operations

__________ preferred stock confers no right to prior period unpaid dividends.

Noncumulative

True or false: A corporation has agreed to pay a $0.10 cash dividend on shares of common stock. On the date of record, no formal journal entry is required.

True

When stock is sold for less than par value, it is issued at

a discount

A voluntary transfer of amounts from Retained Earnings to inform users of special activities that require funds are called:

appropriated retained earnings

stock is the number of shares that a corporation's charter allows it to sell. The number of these shares usually exceeds the number of shares issued (and outstanding), often by a large amount.

authorized

A _________ is the distribution of cash to its owners. This is determined by the board of directors.

cash dividend

When all authorized shares of stock have the same rights and characteristics, the stock is called _______ stock.

common

A ___________ is an entity created by law that is separate from its owners. Owners are called stockholders or shareholders. These entities can be privately or publicly held.

corporation

On May 25, Tyler, Inc. issues 100 shares of $10 par value preferred stock for $5,000 cash. The entry to record this transaction would include a (debit/credit) ________ to the preferred stock account in the amount of _______.

credit; $1,000

The _____ value of stock is an amount assigned per share by the corporation in its charter. In many states, this amount establishes the minimum legal capital, which refers to the least amount that the buyers of stock must contribute or be subject to paying at future dates.

par

A _____ on stock occurs when a corporation issues its stock for more than par (or stated) value.

premium

A ratio that divides market value (price) per share by earnings per share is called:

price-earnings ratio.

When a corporation purchases shares of its own stock, it is called ________ stock.

treasury

_________ has/have special rights that give it priority over other types of stock in one or more areas.

Preferred stock

Stockholders' equity, reported on the balance sheet, consists of which of the following accounts? (Check all that apply.)

Retained Earnings Paid-in Capital

_____ value stock is no-par stock to which the directors assigned a certain value per share. This value becomes the minimum legal capital per share in this case.

Stated

Which of the following statements is false regarding stock splits?

Stock splits increase retained earnings.

There are several reasons why a board of directors would authorize a stock dividend. Which of the following is not a reason for a stock dividend?

To reduce the par value of the stock

True or false: Preferred stock can be issued to raise money without giving up control.

True

True or false: Stockholders do not have the power to bind the corporation to contracts. This is referred to as lack of mutual agency.

True

The stockholders of a corporation elect the

board of directors

_________ stock is the number of shares that a corporation's charter allows it to sell.

Authorized

Blink, Inc. has 1,000 shares of $10 par, 5% preferred stock, and 20,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $20,000 dividend, the payment to common shareholders will total $

Blank 1: 19500

Darby, Inc. has 25,000 shares of stock issued and outstanding. All the shares of stock have the same rights and characteristics; therefore, the stock is called stock.

Blank 1: common

Treasury stock is a(n) equity account, with a normal debit balance. It is reported on the stockholders' equity section of the balance sheet as a reduction to stockholders' equity.

Blank 1: contra

On June 1, the board of directors of Dylan, Inc. declare a cash dividend of $1 per share. On June 1, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a (debit/credit) to the Common Dividend Payable account.

Blank 1: credit

Rush, Inc.'s charter authorized 500,000 shares of stock with a par value of $1 per share. Rush issues 10 shares at a market value of $10 per share. The journal entry to record this transaction will include a (debit/credit) to the Common Stock, $1 par account in the amount of $.

Blank 1: credit Blank 2: 10 or $10

When the board of directors authorizes a cash dividend to investors, there are three important dates involved—the date of declaration, date of record, and date of

Blank 1: payment

Corporations can be separated into two types. A held corporation does not offer its stock for public sale and usually has few stockholders. A held corporation offers its stock for public sale and can have thousands of stockholders.

Blank 1: privately, closely, or private

A is a document that gives a designated agent the right to vote the stock.

Blank 1: proxy

The ______ value per share is the price at which a stock is bought and sold.

market

A _______ dividend, declared by a corporation's directors, is a distribution of additional shares of the corporation's own stock.

stock

A corporation can sell directly or indirectly (through a brokerage).

stock

A corporation sometimes issues a _____ as proof of share ownership.

stock certificate

Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If the board of directors authorizes a $15,000 dividend, the payments to preferred shareholders will total _________.

10,000 shares x $5 x .05 = $2,500.

Stockholders elect the board of

Blank 1: directors

A on stock occurs when a corporation issues its stock for less than par (or stated) value; however, most states prohibit stock to be sold for less than the par (or stated) value.

Blank 1: discount

The board of directors authorizes a cash or distribution of cash to its investors.

Blank 1: dividend

A stock dividend that is greater than 25% of the previously outstanding shares of stock is considered to be a (small/large) stock dividend.

Blank 1: large

The formula for the price-earnings ratio is value per share/earnings per share.

Blank 1: market

Jordan Inc.'s charter states that there are 50,000 shares of stock authorized with a par value of $5 per share. This typically means that investors must pay a (minimum/maximum) of $5 per share to invest in the corporation.

Blank 1: minimum

The costs to start a corporation are called expenses.

Blank 1: organization

Stock that typically includes preference for receiving dividends and for distribution of corporate assets during a liquidation is called _ stock.

Blank 1: preferred

Martin, Inc.'s charter authorizes 50,000 shares of stock with a par value of $1 per share. 1,000 shares of stock are issued at a market value of $5 per share. This means that the shares of stock are issued at a (premium/discount)

Blank 1: premium

Corrections of material errors in past financial statements are called period adjustments.

Blank 1: prior

A charter application usually must be signed by the prospective stockholders called incorporaters or . Then, it is filed with the appropriate state official.

Blank 1: promoters

A(n) keeps stockholder records and prepares official lists of stockholders for stockholder meetings and dividend payments.

Blank 1: registrar

Statutory and contractual restrictions are called retained earnings.

Blank 1: restricted

Carefree, Inc. has 20,000 shares issued and outstanding. On August 1, the board authorizes a 20% stock dividend. This is considered a (large/small) stock dividend.

Blank 1: small

Mario, Inc. declares a 2-for-1 stock . This means that Mario will "call in" its outstanding shares and issue two shares in exchange for each old share of stock.

Blank 1: split

Capital is a general term that refers to any shares issued to obtain capital (owner financing).

Blank 1: stock

Two of the biggest disadvantages of the corporate form of business are government regulation and corporate

Blank 1: taxation, taxes, tax, or double taxation

Stockholders have the right to at stockholders' meeting

Blank 1: vote

J. Flores owns a business and is trying to decide whether to incorporate. While researching corporations, she has determined the following facts. Which of these facts is not correct?

Corporations dissolve when owners transfer rights.

The board of directors of Anchor, Inc. authorizes a $0.50 cash dividend to its 100,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will include which of the following accounts? (Check all that apply.)

Credit to Cash Debit to Common Dividend Payable

Vanya Inc.'s charter authorizes 1,000 shares of stock at a stated value of $1 per share. Vanya sells 50 shares of stock at its initial offering for $10 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.)

Credit to Common Stock for $50. Debit to Cash for $500. Credit to Paid-In Capital, in Excess of Stated Value for $450.

Gomez Inc.'s charter authorizes 1,000 shares of stock at a par value of $1 per share. Gomez sells 200 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include which of the following entries? (Check all that apply.)

Debit to Cash for $200. Credit to Common Stock, $1 par for $200.

Zion, Inc. declares a 10% stock dividend when there are 10,000 shares of $1 par value stock issued and outstanding and the market value is $5 per share. On the date of payment, Zion will issue the stock and record the transaction with which of the following entries? (Check all that apply.)

Debit to Common Stock Dividend Distributable for $1,000. Credit to Common Stock for $1,000.

True or false: An advantage of purchasing preferred stock is that preferred shareholders are guaranteed to receive dividend payments each year.

False

True or false: To record a stock split, debit Retained Earnings and credit Common Stock.

False

Organization expenses, or the costs to organize a corporation, include which of the following? (Check all that apply.)

Legal fees Charter fees

Identify the advantages of the corporate form of business. (Check all that apply.)

Limited liability of stockholders Ease of capital accumulation Continuous life

John Kim agrees to contribute equipment with a fair market value of $5,000 in exchange for 100 shares of Rio Inc.'s common stock with a par value of $1 per share. Rio will record this transaction as a credit to which of the following accounts? (Check all that apply.)

Paid-in Capital in Excess of Par Value Common Stock

Jose Garcia agrees to contribute land with a fair market value of $10,000 in exchange for 200 shares of Damian Inc.'s common stock with a par value of $10 per share. The journal entry to record this transaction in the books of Damian, Inc., will include a credit to _________ in the amount of _______.

Paid-in Capital, in Excess of Par; $8,000

The market value per share is the price at which stock is bought and sold. Which of the following factors does not influence market value?

Par value

On August 20, Max, Inc. issues 100 shares of $1 par value preferred stock for $3,000 cash. The entry to record this transaction would include a (debit/credit) to the preferred stock account in the amount of $.

Blank 1: credit Blank 2: 100

Niren, Inc.'s charter authorizes 1,000,000 shares of stock at a par value of $1 per share. Niren sells 100 shares of stock at its initial offering for $1 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $1 par for $.

Blank 1: credit Blank 2: 100 or $100

Avery, Inc. held 100 shares of its own $10 par value common stock purchased for $15 per share. On December 1, Avery sold 10 shares at $15 per share. The journal entry to record the sale of treasury stock would include a (debit/credit) to Treasury Stock in the amount of $.

Blank 1: credit Blank 2: 150

In January, Stripe, Inc. purchased 50 shares of its own $10 par value common stock for $20 per share. In March, Stripe sold 10 shares at $25 per share. The journal entry to record the sale of treasury stock using the cost method would include a (debit/credit) to Treasury Stock in the amount of $.

Blank 1: credit Blank 2: 200

Josie Inc.'s charter authorizes 1,000 shares of stock with no par value. Josie Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, for $.

Blank 1: credit Blank 2: 500

Riley Inc.'s charter authorizes 1,000 shares of stock at a stated value of $10 per share. Riley issues 50 shares of stock at its initial offering for $20 per share. The journal entry to record this transaction will include a (debit/credit) to Common Stock, $

Blank 1: credit Blank 2: 500

On June 1, the board of directors of Big, Inc. declare a 20% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction would include a (debit/credit) to Retained Earnings in the amount of $.

Blank 1: debit Blank 2: 10000

Dane, Inc. purchased 10 shares of its own $5 par value common stock for $20 per share. The journal entry to record this transaction would include a (debit/credit) to the Treasury Stock account in the amount of $.

Blank 1: debit Blank 2: 200

Fortune, Inc. holds 50 shares of treasury stock purchased for $20 per share. In March, Fortune sold 10 shares at $50 per share. In December, Fortune sold another 5 shares at only $10 per share. The journal entry to record the transaction in December will include a (debit/credit) to the Paid-in Capital, Treasury Stock account in the amount of $.

Blank 1: debit Blank 2: 50

A(n) agent assists with purchases and sales of shares by receiving and issuing certificates as necessary.

Transfer

A corporation can pay a brokerage house to issue its stock. Some brokerage houses underwrite an indirect issuance of stock; they buy the stock from the corporation and resale it to investors.

True

Which of the following is not a characteristic of a corporation?

Unlimited liability of stockholders

Carin, Inc. declared a 50% stock dividend on January 15, when there were 10,000 shares of $1 par value stock issued and outstanding, and the market value was $20. The entry to record the declaration will include debit to the _______ account, in the amount of _______.

_________ has/have special rights that give it priority over other types of stock in one or more areas.

Logan, Inc. held 500 shares of treasury stock with a cost of $10 per share. In December, Logan sold 10 shares at $20 per share. The journal entry to record the sale of treasury stock using the cost method would include a (debit/credit) ________ to Treasury Stock in the amount of ________.

credit; $100

On January 1, the board of directors of Zion, Inc. declare a 10% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. On March 15, the date of payment, Zion issued the stock. The entry necessary on March 15 would include a (credit/debit) ______ to Common Stock Dividends distributable for ______.

debit; $1,000

Linus, Inc. holds 100 shares of treasury stock purchased for $10 per share. In March, Linus sold 50 shares at $30 per share. In December, Linus sold another 10 shares at only $5 per share. Using the cost method, the journal entry to record the transaction in December will include a (debit/credit) _________ to Paid-in Capital, Treasury Stock in the amount of _______.

debit; $50

Bryce, Inc. declared a 50% stock dividend on March 15, when there were 1,000 shares of $1 par value stock issued and outstanding, and the market value was $5. The entry to record the declaration will include (debit/credit)_______ to the Retained Earnings account, in the amount of _______.

debit; $500

Franz Inc. declared a 50% stock dividend when there were 10,000 shares of $1 par value stock issued and outstanding, and the market value was $5 per share. On the date of payment, the entry to record distribution of stock will include a (debit/credit) ______ to the common stock dividend distributable account, in the amount of $_____.

debit; 5,000

One way to help identify whether a stock is an income stock or a growth stock is to analyze its _______, by taking annual cash dividends per share divided by market value per share.

dividend yield

Preferred stock usually carries a preference for dividends, meaning that:

dividends are allocated to preferred shareholders before they are issued to common shareholders

The amount of income earned per each share of a company's outstanding common stock is known as:

earnings per share

Stock dividends are given to

keep the market price of the stock affordable.

The formula to compute dividend yield takes annual cash dividends per share divided by:

market value per share

A statement of stockholders' equity lists balances of:

net income retained earnings common stock shares cash dividends

_________ value stock is stock not assigned a value per share by the corporate charter. Its advantage is that it can be issued at any price without the possibility of a minimum legal capital.

no-par

Corrections of material errors in prior period financial statements, such as arithmetic errors, unacceptable accounting, and missed facts are reported in the statement of stockholders' equity as:

prior period adjustments

A stock __________ is the distribution of additional shares to stockholders according to their percent ownership. When this occurs, the corporation "calls in" its outstanding shares and issues more than one new share in exchange for each old share.

split

Vernon, Inc.'s charter did not assign a par-value to its authorized stock. However, Vernon's directors assigned a(n) ________ value per share. This value becomes the minimum legal capital per share in this case.

stated

The _____ lists the beginning and ending balances of key equity accounts and describes the changes that occur during the period.

statement of stockholders' equity

The board of directors of Visor, Inc. authorize a _________, a distribution of additional shares of the corporation's own stock, to existing shareholders.

stock dividend

Rank the following groups in order of authority--with the highest authority at the top.

stock holder board of directors president ect employees

A corporation is created by obtaining a charter from:

the state government

No-par value stock is stock not assigned a value per share by the corporate charter. Its advantage is that ___________.

there is no minimum legal capital

Keys, Inc. purchased 100 shares of its own common stock for $10 per share. The stock is now classified as ______ stock, a contra equity account, reported on the statement of stockholder's equity.

treasury

On March 15, the board of directors of Richmond, Inc. declare a cash dividend of $1 per share. On March 15, there are 1,000 shares of stock issued and outstanding. The journal entry required on the date of declaration will include a debit to the _________ account.

Retained Earnings

The account that consists of a company's cumulative net income less any losses and dividends declared since its inception is called _________.

Retained Earnings

On January 1, the board of directors of Shante, Inc. declared a 10% stock dividend. On this date, there were 10,000 shares of $1 par value stock issued and outstanding and the market value was $5 per share. The entry to record this transaction would include a debit to _____ in the amount of ______.

Retained Earnings; $5,000

The price- ratio reveals market expectations.

Blank 1: earnings

True or false: Growth stocks pay large amounts of cash dividends.

False

When stock is cumulative preferred stock and the board of directors does not declare a dividend, the unpaid dividend amount is called:

dividend in arrears.

In the computation of basic earnings per share, a company will use the _____.

weighted-average common shares outstanding

Identify the formula to compute basic earnings per share.

(Net income - preferred dividends)/weighted-average common shares outstanding

Identify the disadvantages of the corporate form of business. (Check all that apply.)

Corporate taxation Government regulation

Bing Inc.'s charter authorizes 500 shares of stock with no par value. Bing Inc. sells 100 shares of stock at its initial offering for $5 per share. The journal entry to record this transaction will include a (debit/credit) _______ to Common Stock for ______.

credit; $500

A small stock dividend is a distribution of _____% or less of previously outstanding shares.

A small stock dividend is a distribution of _____% or less of previously outstanding shares.

Roger Hillcrest owns 100 shares of $10 par, 5% noncumulative preferred stock. During the current year, there are no dividends declared or paid. If there is a large cash dividend paid in the following year, Roger would be entitled to up to $ for the previous year before common shareholders are paid.

Blank 1: 0

Crystal, Inc. has 500 shares of outstanding $10 par common stock, with a current market value of $20 per share. Earnings per share is $2.00. The price-earnings ratio is

Blank 1: 10

Mario Hernandez owns 25 shares of $100 par, 5% cumulative preferred stock. During the current year, no dividends are declared or paid. The unpaid amount of $ is considered dividends in

Blank 1: 125 Blank 2: arrears

Visor, Inc. had net income during the period of $10,000. Preferred dividends were $2,000 and the weighted-average common shares outstanding were 500. Basic earnings per share equal $

Blank 1: 16

Peas, Inc. has 1,000 shares of $5 par value common stock outstanding. The annual cash dividend per share was $6.00; market value per share was $30; and net income during the period was $65,000. Dividend yield equals

Blank 1: 20

(Cumulative/noncumulative) preferred stockholders have a right to be paid both the current and all prior periods' unpaid dividends before any dividend is paid to common stockholders.

Blank 1: Cumulative

Philip's Inc. reports stockholders' equity on its financial statements. The two items reported in the stockholders' equity section of Philip's balance sheet are Capital and Retained Earnings.

Blank 1: Paid-in or Contributed

is an account that consists of a company's cumulative net income less any losses and dividends declared since its inception.

Blank 1: Retained Blank 2: Earnings

Investors who buy a corporation's stock sometimes receive a stock as proof of share ownership.

Blank 1: certificate